The continued development of contentious restructurings as litigation

Following a series of important decisions in England and across Europe, it is now beyond doubt that court-based restructuring processes should be approached from the outset as pieces of litigation.

We have seen increasingly sophisticated challenges to restructurings, which the courts are willing to accommodate. In appropriate cases, the courts have also refused to sanction restructurings.

Successfully navigating this landscape will require parties to carefully apply the guidance from the courts to de-risk their overall strategy from day one, whether proposing, supporting or challenging a restructuring. The pitfalls are many and serious - and there are some particularly cautionary tales from the recent court decisions.

Restructuring as litigation in England

These are fundamental issues that go to the heart of a party’s approach to a court-sanctioned restructuring. As the restructuring toolkit available to parties around the world continues to develop at pace, approaching all aspects of the process as litigation should be the starting point for all those involved.

In a series of decisions, detailed guidance has been provided to all those involved, including proposing companies, experts, challengers, other stakeholders and these parties’ advisers. These include the Court of Appeal decision in Adler and the more recent cases of McDermott and Aggregate, which follow the useful first instance decisions in Smile Telecoms and others. With the rise of restructuring processes with inherently more contentious features – notably cross class cram down - more cases are sure to follow.

What might ‘success’ look like in this context?

It is possible to view success in litigation as boiling down to a court finding in a party’s favour following detailed disclosure, exchange of witness and expert evidence and a fully contested trial of all the relevant issues.

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